Lotte Chemical mulls ‘strategic measures’ for Malaysian-listed LC Titan

SINGAPORE (ICIS)–South Korean producer Lotte Chemical said on Thursday that it is exploring options for its Malaysian subsidiary, in response to local media reports that the unit is up for sale.

“We are considering various strategic measures related to LC Titan [Lotte Chemical Titan] which is our subsidiary, but nothing has been decided so far,” Lotte Chemical chief financial officer Seong Nak-sun said in a stock exchange filing.

“We will re-announce the details within a month or when they are decided in the future,” Seong added.

Lotte Chemical and LC Titan could not be immediately reached for further comments on the potential sale.

At 05:30 GMT, shares of the two listed companies were trading lower, with Lotte Chemical down 1.63% in Seoul, and LC Titan down 1.72% in Kuala Lumpur.

According to media reports on Thursday, Lotte Chemical has already initiated the process of selling LC Titan, citing unnamed sources.

“We’re actively reviewing ways to optimize our portfolio, which includes considering the potential sale of LC Titan. However, a definitive decision has not yet been reached,” an unnamed Lotte Chemical official was quoted by The Korea Economic Daily (KED) as saying.

Lotte Chemical is approaching both domestic and international companies, along with private equity firms through investment banks, to be potential buyers for its Malaysian arm, KED reported.

The Korean producer is planning to sell all outstanding shares of LC Titan traded on the Malaysian stock market, which is equivalent to 74.7% of the company, valuing the firm at around $550m based on current market capitalization, it added.

LC Titan has incurred a second year of net loss, which widened to Malaysian ringgit (M$) 780.3m in 2023 as sales declined by 24% to M$7.65bn.

Malaysia’s LC Titan full-year financial results

in thousand ringgit (M$)	FY2023	FY2022	% change
Sales	7,646,170	10,019,083	-23.7
Loss from operations	(868,001)	(1,041,451)	-16.7
Net profit	(780,286)	(731,061)	6.7

Meanwhile, parent firm Lotte Chemical swung into a net loss last year.

S Korea’s Lotte Chemical full-year financial results

in billion S Korean won (W)	2023	2022	% Change
Sales	19,949	22,276	-10.4
EBITDA	839	185	353.5
Operating profit	-333	-763
Net income	-301	28

In the notes accompanying its financial results released on 7 February, Lotte Chemical had stated that that it “will pursue advancement and improvements to the business portfolio in order to actively respond to changes in the business environment of the petrochemical industry and improve profitability through efficient management of existing petrochemical businesses”.

“The weak market conditions of the petrochemical industry are ongoing due to reduced demand and dropping product prices resulting from global uncertainties, as well as increased supply burdens caused by large-scale ethylene plant expansions in China,” it said.

The acquisition of Malaysian company Titan Chemicals in 2010 was the Korean firm’s first foray into southeast Asia. The acquired company was rebranded Lotte Chemical Titan, and in 2017, was listed on the Malaysian bourse.

LC Titan operates 12 plants at two sites in Johor, Malaysia; and holds a 40% stake in LOTTE Chemical USA based in Houston, Texas.

In Indonesia, the company operates polyethylene plants, and in Q1 2022,  started construction of LOTTE Chemical Indonesia New Ethylene (LINE) Project, which will increase production capacity in Cilegon by 65% to 5.88m tonnes/year.

The project is expected to produce 1m tonnes/year of ethylene; 520,000 tonnes/year of propylene; 250,000 tonnes/year of polypropylene (PP); and 140,000 tonnes/year of butadiene (BD). It is scheduled to be completed in 2025.

Focus article by Nurluqman Suratman

($1 = M$4.71; $1 = W1,330)

Thumbnail image: A Lotte Chemical Titan plant in Pasir Gudang, Malaysia (Source: Lotte Chemical Titan)